Formula Archive

Variance At Completion (VAC) is the difference between what the project was originally expected (baselined) to cost, versus what it is now expected to cost.

Every month, our vendor is required to report this total on the project as a whole and on key deliverables. I’m used to seeing the numbers reported and how to calculate them. I’m not asking for the Cost Performance Index (CPI). I want to know how far over or under we’re going to be compared to the budget.

The formula I memorized for the PMP exam and the same formula I use to calculate VAC today is: Variance At Completion = Budget At Completion – Estimate At Completion
(VAC = BAC – EAC)

So, I ask myself, [1] why is there no VAC definition and [2] VAC formula in the PMBoK?

When I was studying for the PMP exam, a few years ago, I remember memorizing a group of formulas. One of those was the “Variance of Activity.” At this point, don’t remember if it was even referenced in the exam. There were no direct questions asking “what is the formula for…” On my exam, I remember having numerous questions resulting from schedule variance calculations and cost variance calculations. To my surprise, I went searching for the Variance of Activity formula in the PMBOK (4th Edition) and I can’t find it! So as not to lead people astray when giving PMP study advice, I’m now researching each formula I was once told to memorize. I’m very surprised PMI didn’t save us a lot of trouble and list known formulas in the back of the PMBOK.

I think back to when I sat for the PMP exam and remember taking the first few minutes to quickly write down the following formulas. It was my cheat sheet. There was enough to think about for the next few hours and worrying if I could remember some key formulas was not one of them. So, here is a bit of advice. If you’re preparing[1] to take the PMP exam, MEMORIZE these formulas. The exam won’t come right out and ask you to identify the correct formula for a variance of an activity. Rather, it will offer a question like: Your current activity was pessimistically estimated at 65 hours and optimistically estimated at 40 hours. What is the variance of the activity? (you can use this formula for both time and cost)

You can see how knowing the formula is going to make you or break you on this question.

Do yourself a favor. Make flash cards, get a tattoo, it doesn’t matter. Commit these formulas to memory and you’ll save yourself some pain and suffering (and a few points on the exam).

[1] This is a link to a product I created

While reviewing proposal documentation yesterday, I noticed the contractor’s predicted velocity rate was pretty high. Being they are not experienced in using Agile and they haven’t even started the project, I was curious how they were able to calculate such a high velocity rate for the first iteration. I know how many developers they intend to use and I know their proposed iteration durations. I’m not going to get into the specifics as to how they estimated features (user stories, requirements, backlog items, etc.). So, what did I expect?

Velocity is a very simple method for accurately measuring the rate at which teams deliver business value. To calculate velocity, simply add up the estimates of the features successfully delivered in the last sprint or iteration. What about the initial iteration?

Terms to understand when calculating initial velocity:

[1] Number of Developers – How many developers will you have doing actual work?

[2] Capacity – What is the maximum amount of work one person can accomplish in an ideal situation during the iteration?

[3] Number of Iteration Days – How many work days are in the iteration?

[4] Load (Capacity) Factor - The ratio of the actual work output over a period of time and the output if the developer had operated at full capacity over that time period. e.g. 1/3 = 2.4 Hours , 1/2 = 4 Hours, 1/1 = 8 Hours

[5] Velocity – How much Product Backlog value a team can deliver in one iteration.

Because you don’t know team velocity for the first iteration, plan initial velocity at one-third of total capacity in order to account for coffee breaks, design, email, meetings, rework, research, etc. As an example, with seven (7) developers and at one-third (1/3) capacity, a total of 2.1 ideal developers are available. Multiply the number of ideal developers by the number of work days to arrive at the total of ideal work days. These ideal work days will be applied against your estimated features, to arrive at an initial velocity.

I was at a vendor site yesterday, discussing how they were going to satisfy our needs on four upcoming projects. There were four people in the meeting: the technical lead from the vendor, the product manager from our organization, a director from our organization, and myself. Since I am the project manager, I had to take into account each perspective of each participant. Communications grows exponentially, every time you add another person to a meeting or project. A project manager needs to realize the complexity and manage it accordingly.

The situation reminded me of a few questions that were on the PMP exam. Communication Channels can be calculated by using the following formula: [N (N-1)]/2 where N equals the number of people involved. Do not just memorize the formula, UNDERSTAND it. Below is an illustration of the formula that should help you visualize it.

If on the PMP exam, I had been asked how many channels of communications existed in the meeting, I could either draw a picture with lines between the people or I could just use the formula. Take my word for it, just memorize the formula and understand when it applies.